Ferrous Scrap Prices See Big Bump in November

Ferrous scrap prices saw an unexpectedly big jump in November, with shredded scrap selling as high as $75/GT above October levels. Prime scrap rose $20/GT, sources tell Steel Market Update. Observers were expecting higher prices in November on strong export demand and some seasonal tightening of supplies, but were surprised by the size of the increase. Scrap prices are closely watched as a future indicator of finished steel prices.

Prices for shredded scrap rose $55-$75/GT depending on the region, reported one dealer in the Northeast. “The dramatic increase is supply driven. Inventories are low in dealers’ yards, winter is coming and mill demand is really good. In addition, U.S. shred prices had to catch up with the export increase that happened over the course of October. It ended up overshooting the export price level because of tight U.S. supply,” he said.

Prices for prime scrap also rose in November, though not as much. Prime grades moved higher by $20/GT. “Prime grades were not as constrained by supply, and mills pivoted to using shred over the summer following the historically wide prime-shred spread,” said one dealer.

November prices for shredded scrap settled in the $520-$540/GT range, with some spot sales as high as $560/GT. November prime prices landed at $590-$620/GT depending on the region. HMS traded at $455/GT and P&S at $490/GT, reported various sources. 

In the meantime, published export pricing is around $500 per ton CIF. “Exporters have a good bit of dockside scrap to procure for vessels sold at lower prices in October,” said one observer. “Either the U.S. market will come down or export will come up. It’s a little too early to tell, but Turkish mills are challenged to sell steel at the moment because of falling Asian prices and the removal of Section 232 tariffs for European steel into the U.S.” 

“Export prices have outstripped the increase in domestic prices for November, but the U.S. prices will catch up over the next two months,” predicted another scrap exec. “December and January will be an absolute bloodbath for U.S. scrap buyers, winter weather notwithstanding. Prices could increase by another $50-75/GT over that period.”

Pig Iron Market

Pig iron has not been in play over the last several weeks, reported one market expert. The Chinese are not buying due to a pullback in steel production there. The Brazilians are sold out until, at best, January shipment, which could mean March arrival upriver in the U.S. It’s hard to pin down where the Russians are now, but they do not want to sell at down numbers, especially with the vigorous upswing in scrap on both sides of the Atlantic. “I would predict a $10-15/MT increase in the next round of U.S. buys, which would bring prices up to the $550-555/MT CFR level,” he said.   

Commenting on U.S. Steel’s plans to create a joint venture for production of pig iron at Gary Works, he said: “It was only a matter of time before either U.S. Steel or Cleveland-Cliffs decided to produce pig iron. The virgin iron markets along with prime scrap needed a domestic source. This way USS can use their assets like iron ore mines, pellet plants and blast furnaces to help them to convert a portion of their business to EAF. … A pig iron plant producing 500,000 tons per year will not change the U.S. pig iron market much. If they use it themselves, there is enough new EAF steelmaking capacity coming online in the next five years to increase U.S. imports.”

By Tim Triplett, Tim@SteelMarketUpdate.com